February 06, 1999
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| February 06, 1999 | atimes.com | |
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| Global Economy EDITORIAL: Conflicting paradigms If there is one thing that came out of the 300-some sessions, sideline discussions and press conferences at the just concluded Davos World Economic Forum, it's the realization that there is no consensus among world economic leaders, private or official, on the forum's theme of managing the impact of globalization - not even signs of the emergence of a consensus. Indeed, in response to successive episodes of financial turmoil since the summer of 1997 - Asia, Russia, Brazil - the positions of the Americans, on the one hand, and the continental Europeans, Japanese and some other Asians (notably Malaysians), on the other hand, have continually grown farther apart on the causes of and remedies for the turmoil . To put it in the simplest terms, where the Americans see as the answers greater openness and the institution and impartial enforcement of equitable legal and regulatory regimes, their opponents on the other sides of the Atlantic and Pacific Oceans seek salvation in more state control over capital flows and currency markets. After these opposing views first clearly emerged at the October 1998 annual IMF/World Bank meetings in Washington and were restated and reinforced at Davos, the scene will now shift to Germany (current G-7 chair) with meetings of the G-7 finance ministers in April and the G-7 Cologne summit in June. We are quite certain - and indeed welcome the prospect - that no substantial narrowing of the respective positions will be forthcoming. At issue and at stake are conflicting economic and economic policy paradigms, the choice between which will ultimately be decided not by politicians and administrators but by proven success or lack thereof. In that regard, the respective merits and demerits of the American versus the continental European/Japanese models are already quite well established. The performance of the American economy over the past decade speaks for itself, and the failures of the European and Japanese ones speak for themselves. A wide performance gap has opened in employment-creation, wealth-creation and wealth-distribution; that gap continues to widen by the day. Politicians and administrators outside the two competing realms, whether in Asia or in Latin America, will continue to be slow on the uptake, slow to recognize which way the wind is blowing. Businessmen and investors, however, we are quite confident, will not be. The sad fact and prospect is that it will likely take some more wrenching crises - especially in Europe - before the statists and ''control freaks'' (as MIT's Rudi Dornbusch has labelled them) will throw in the towel. | |||||||||
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